Financial Review vs. Audit
Blue Avocado recently published a great letter from a lawyer regarding the difference between a Financial Review and a full-blown Audit. Check it out here: http://www.blueavocado.org/content/attorney-recommends-review-instead-audit
Clients frequently ask us if they need an audit or a review. This can be dictated by state requirements, the need for a Federal A-133, or by specific funders requirements. The state of New York has especially onerous requirements that have a very low threshold for when non-profits have to conduct an audit. Each organization should be aware of the state requirements and requirements of funders - both current and future prospects - when making this decision. There are two basic differences between the two: One, the cost of a review is typically 1/2 that of an audit. And secondly, a review is just that... a review. The CPA doesn't perform in-depth 'testing' as they do in an audit. They review for material issues and obvious deviations from GAAP. But they won't go in and test unique individual transactions in the same way an audit is done. A review provides some assurance, but does not independently validate transactions.
The moral of the story is to make sure you comply with government regulations based on your size and geography. And be proactive to understand funders requirements. (i.e. the United Way requires a review for organizations of a certain size, an audit for larger ones.)
Keeping track of all these regulations can be tricky, so make sure you have an active informed Finance Committee or a partner like Easy Office who can help you through the issues.